Tuesday, June 30, 2009

Rio Salado Exposes Financial Aid Fraud

Rio Salado College, working with federal authorities, has exposed a massive financial aid fraud scheme, resulting in 130 indictments against the perpetrator and her accomplices. Upon its early detection of suspicious activity, Rio Salado contacted authorities and worked in partnership with them throughout the investigation with the intent to bring the perpetrators to justice. We are grateful to our staff for their alertness, which lead to the identification of this problem, and their vigilance over federal student aid funds. At no time were any Rio Salado employees participants in the financial aid scheme.

What is the nature of the financial aid fraud that was committed against Rio Salado?
Rio Salado College in Tempe was targeted by an individual (not an employee) who, it is alleged, purposefully set forth to commit financial aid fraud. She recruited four other individuals (non-employees) to assist her, and they in turn recruited dozens of others who agreed to pose as “straw students” – in other words, non-authentic students—in order to obtain financial aid funds, which would then be illegally shared with the original perpetrator. There was considerable forgery of documents, such as high school diplomas, and false information was supplied to the college. These straw students had no intention of staying enrolled and dropped or were dropped from their classes once their checks were received. The estimated amount of federal financial aid that was fraudulently obtained in the form of loans and grants is in excess of $538,000.

On June 24, 2009, after an extensive investigation by federal authorities, the U.S. Attorney/District of Arizona (Diane J. Humetewa) held a press conference to publicly expose the fraud and to announce the indictment and arrest of the original perpetrator, identified as Trenda Lynne Halton of Peoria, AZ, on 130 counts of criminal activity, plus indictments against 64 other individuals suspected of involvement.

How was the scheme exposed?
Early on, a very alert part-time employee in Rio Salado’s Financial Aid office noticed similarities in handwriting on financial aid applications. She brought it to the attention of her supervisors, and internal investigations revealed irregularities on multiple applications that suggested suspicious activity. These facts were quickly brought to the attention of the U.S. Department of Education/Office of the Inspector General in Long Beach, CA. Because mail fraud was also suspected, the U.S. Postal Inspection Service became involved as well. Rio Salado not only uncovered the scheme but assisted with the extensive federal investigations every step of the way.

What is the position of the federal authorities toward Rio Salado College?
During the June 24 press conference, U.S. Attorney Diane Humetewa publicly commended Rio Salado for its alertness in detecting the fraud and its ongoing cooperation with the federal investigation.

What safeguards does Rio Salado have in place to protect against fraudulent financial aid schemes?
First, it is important to note that in the case of Rio Salado, the processes already in place worked and there was early detection. These processes are followed by Rio employees:
1. Rio adheres to the Maricopa Community College District policy to mail financial aid checks and not deliver them in person. In fact, many checks in this fraudulent scheme were never received because the addresses used were false.
2. Rio Salado’s own policy is to mail checks only after the drop/add period ends. This prevents students from enrolling and quickly dropping simply to receive financial aid.
3. Rio Salado verifies identification through photo ID for certain types of disbursements, such as book vouchers. ID may include drivers’ licenses, birth certificates, and passports.
4. Financial aid employees are trained to follow standardized policies and procedures to detect irregularities or fraud.

Do colleges with a significant online student population face an increased risk of financial aid fraud?
There is no reason to think online colleges are more at risk, because the FAFSA application is the same for online and in-person students.

What are the penalties for federal financial aid fraud?
It should be noted that the official FAFSA application for financial aid carries warnings that financial aid fraud is a crime punishable by significant fines. However, multiple other charges, including mail fraud, are pending against everyone indicted in this particular scheme. Conviction for mail fraud, for example, carries penalties of up to 20 years in prison and fines up to $250,000, or both for each count.

What is Rio Salado’s current point of view regarding the investigation?
President Linda M. Thor released a statement during the June 24, 2009 press conference that read:
“As President of Rio Salado College, I want to express how proud I am of the staff of our Financial Aid Office for their stewardship of taxpayers’ funds. I commend them for being alert, vigilant, well-trained and cooperative. Federal financial aid is for the benefit of serious students wishing to better their lives and definitely not for misuse. We will not tolerate abuse of the system, and we will continue as a college to practice due diligence in processing all financial aid applications. It is our intent to continue to fully cooperate with the U.S. Attorney’s Office and all designated authorities for this case.”

To view the US Attorney’s Office press release, click here.